Paper to be presented at

DRUID15, Rome, June 15-17, 2015

(Coorganized with LUISS)

The Spin-Along StrategySebastian FischerTU Berlin/Telekom

Innovation Economics/Telekom Innovation Laboratoriessebastian-fischer@telekom.de

AbstractThis paper enhances an emerging concept of corporate entrepreneurship theory: the spin along approach. Thespin-along approach depicts a unique method that brings together rudiments of internal and external corporateventuring. By taking the spin-along approach into account, I propose the spin-along strategy to be an alternativestrategic attempt for organiza-tions, which aim to adapt to changing environmental conditions. I acknowledge theviewpoint of adaptionistic population ecologists, who claim that although incumbency may lead to struc-tural inertia,larger companies can learn from past experiences and take action to change their organization. After defining thespin-along strategy, the paper addresses the issue of distance between spin-along ventures and their parentalorganization with the help of the newly intro-duced ?Spin-Along Shell Model?. Finally, I derive implications for academiaand R&D Man-agement practitioners and open up the discussion for future research directions, which have the potentialto sharpen the spin along strategy further.

Jelcodes:L10,O32

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The Spin-Along Strategy

ABSTRACT

This paper enhances an emerging concept of corporate entrepreneurship theory: the

spin along approach. The spin-along approach depicts a unique method that brings together

rudiments of internal and external corporate venturing. By taking the spin-along approach into

account, I propose the spin-along strategy to be an alternative strategic attempt for organiza-

tions, which aim to adapt to changing environmental conditions. I acknowledge the viewpoint

of adaptionistic population ecologists, who claim that although incumbency may lead to struc-

tural inertia, larger companies can learn from past experiences and take action to change their

organization. After defining the spin-along strategy, the paper addresses the issue of distance

between spin-along ventures and their parental organization with the help of the newly intro-

duced “Spin-Along Shell Model”. Finally, I derive implications for academia and R&D Man-

agement practitioners and open up the discussion for future research directions, which have

the potential to sharpen the spin along strategy further.

Keywords: spin-along; adaptive cycle; corporate venturing

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INTRODUCTION

The Practitioner’s View: Incumbent’s Curse

Large companies face challenges related to increasing the efficiency of their current

business, while exploiting new business opportunities to survive in the long run. This phe-

nomenon is called the “incumbent’s curse”. Incumbency, as described by Tellis and Chandy

(2000) paralyzes firms, because their outstanding resource and capability base does not neces-

sarily lead to a comprehensive exploitation of their opportunities. The competitive advantage

of incumbency should theoretically enable firms to change their shape by following internal

(e.g. own R&D, new product development) and external (e.g. joint ventures, venture capital

investments, mergers and acquisitions) innovation strategies (Burgelman, 1983a; Chesbrough,

2000; Lichtenthaler and Ernst, 2006; Miles and Covin, 2002; Roberts and Berry, 1985). How-

ever, as population ecologists argue "there are very strong inertial pressures on structure aris-

ing from both internal arrangements (for example, internal politics) and from the environment

(for example, public legitimization of organizational activity)" (Hannan and Freeman, 1984,

1977, p. 957), which leads to the curse of incumbency.

The Academic View: Structural Inertia

The question arises, how incumbent firms can overcome their structural inertia and

change their organizations to better adapt to environmental changes. To answer this question I

highlight Van de Ven and Poole (1995), who proposed four groups of organizational change

theories: life-cycle, evolutionary, teleogical and dialectical theories. Life-cycle and evolution-

ary theories understand organizational change as a process which builds on past events; op-

tions for change can be determined as a matter of probability (first-order change). In contrast

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the latter two groups of theories understand organizational change as an ever-destructing pro-

cess, which does not build on the past, but on emerging events that change the goal setting for

an organization’s future (second-order-change).

The theory of population ecology is stronger related to the evolutionary theory catego-

ry and focuses on groups of organizations (“population”) and investigates death- and birth-

rates of populations as well as the interaction and comparison of different populations within

same or different environments (Hannan, 1989).

Population ecology scholars argue about two different explanations for firm survival:

selection and adaptation (Aldrich and Pfeffer, 1976; Astley and de Ven, 1983; Hannan and

Freeman, 1977). They argue that the difference between selection and adaptation relates to the

unit of analysis (Aldrich and Pfeffer, 1976; Hannan and Freeman, 1977). In the “selection

viewpoint”, vital rates within populations change not because organizations purposefully

change themselves, but because new organizations emerge that are better aligned to changing

environmental conditions and outperform established and inert firms. Within this viewpoint

organizations face a high level of structural inertia (described as incumbent’s curse above),

which hinders them to change at all.

In contrast the “adaptation viewpoint” acknowledges an organization’s ability to adapt

to environmental changes and overcome structural inertia by learning from past experiences

(Cyert, 1992; Levitt and March, 1988; Miles et al., 1978). Nevertheless an increasing pres-

ence of structural inertia decreases the influencing power for adaptation towards selection.

Hannan and Freeman (1977) argue that "a complete theory of organization and environment

would have to consider both adaptation and selection” (p. 930), meaning that the duality be-

tween adaptation and selection is considered to frame the discussion of organizational change.

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Research Strategy

In the paper at hand I take the viewpoint of adaptation – I investigate how (especially

large, incumbent) companies can overcome structural inertia with an emerging measure of

corporate venturing – the spin-along approach. Due to the increasing empirical work on the

spin-along phenomenon (Klarner et al., 2013; Mahdjour and Fischer, 2014, 2013; Michl et al.,

2012; Rohrbeck et al., 2009, 2007; Salona et al., 2000), I agree to the necessity to conceptual-

ize it further. To address this need I am going to describe the spin-along approach as an alter-

native strategy to master the cycle of adaptation (Miles et al., 1978). Having done so, I will

argue that a spin-along strategy, which incorporates the basic approach of “spinning-along”

corporate ventures, shall be understood as an integrative part of corporate strategy. I will fur-

ther propose the “Spin-Along Shell Model” as a tool to understand the spin-along strategy and

the distance between a parental organisation and its ventures better.

Overview of relevant Theoretical Concepts

In the following I will deduct a chain of concepts relevant for this paper. I will link the

concepts of adaptation, strategy, corporate entrepreneurship, corporate venturing and the spin-

along approach.

Firstly, by incorporating other scholars (Child, 1997; Floyd and Lane, 2000; Miles et

al., 1978), Sánchez et al. (2011) argue that "the process of strategy is considered a dynamic

process, with adaptation being the key aspect needed to achieve competitive advantage in a

long-term perspective" (p. 15). Therefore adaptation can be understood as a metaphor for

Strategic Management (Chakravarthy, 1982) .

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Secondly, corporate entrepreneurship describes a firm’s ambition to nurture entrepre-

neurial behaviour within its organization to increase its innovative capacity (Ireland et al.,

2009).

Scholars argue that strategic management and corporate entrepreneurship are related

to each other (Barringer and Bluedorn, 1999; Burgelman, 1983b). Barringer and Bluedorn’s

quantitative analysis showed evidence that corporate entrepreneurship is positively influenced

by strategic management practices like scanning intensity, planning flexibility, planning hori-

zon, locus of planning, and control attributes (Barringer and Bluedorn, 1999).

In addition Zahra (1995) argues that “corporate entrepreneurship consists of a compa-

ny’s innovation, strategic renewal and corporate venturing” (p. 227). What are these three

components in a nutshell?

First, an innovation is a new product or service, which is commercialized in a new or

existing market. A company becomes innovative when financial and human resources are

allocated for innovative projects and it will stay that way if this innovation infrastructure can

be maintained (Narayanan et al., 2009).

Second, strategic renewal is strongly linked with organizational change and deals with

the process of companies that change their competitive profile, meaning they renew their way

of doing business strategically (Narayanan et al., 2009).

The third aspect of corporate entrepreneurship, corporate venturing, is about creating

new business inside or outside an organization (Sharma and Chrisman, 1999).

Narayanan et al. (2009) argue that these three components are strongly interlinked, for

instance “innovation could induce renewal” (p. 59). Though similarities between the three

components exist, I underline that corporate venturing specifically focuses on the creation and

integration of new business.

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Within the corporate venturing domain, the spin-along approach is an emerging con-

cept that combines internal and external corporate venturing (Rohrbeck et al., 2007). If the

units of analysis are “semi-autonomous or autonomous organizational entities that reside out-

side the existing organizational domain” (Sharma and Chrisman, 1999, p. 19) external corpo-

rate venturing is meant. Terms in the external venturing domain are for instance joint-

venturing, alliances and firm acquisitions. They all contribute to the long-term performance

and growth of larger firms (Kotabe et al., 2002; Lee and Beamish, 1995; Williams and Lee,

2009).

In contrast, internal corporate venturing “refers to the corporate venturing activities

that result in the creation of organizational entities that reside within an existing organization-

al domain” (Sharma and Chrisman, 1999, p. 20). Internal corporate venturing units usually

have higher management sponsorship compared to regular business activities, which enables

them to act as if they were independent business units.

It becomes clear that the differentiation between these two viewpoints of corporate

venturing is rather an either-or perspective: either the venture stays outside or inside the cor-

porate parent. The spin-along approach acknowledges an integrated viewpoint, which is taken

by many companies, and aims to merge both perspectives (Rohrbeck et al., 2009).

By building on the groundwork of Rohrbeck et al. (2009, 2007), Mahdjour and Fischer

(2013) defined the spin-along approach as an organizational means to “build on ideas or R&D

results to spin out new ventures as ‘innovation speedboats’ to reduce barriers within the inter-

nal innovation process” (p. 2). Furthermore they underline that “at the core of the spin-along

approach is the maintenance of a relevant stake in the new ventures (e.g. via ownership of

shares or key assets) to flexibly decide whether to spin them in or off in the future” (p. 2).

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Research Goal

The academic field of entrepreneurship faces an increased challenge to build and test

theory (Zahra, 2007). More specifically Narayanan et al. (2009) argue that corporate ventur-

ing research would “benefit greatly from giving more attention to theory building” (p. 69).

Specifically the spin-along approach has recently been addressed by an increasing

number of papers; though the total amount of scholars dealing with the topic is still scarce

(Klarner et al., 2013; Mahdjour and Fischer, 2014, 2013; Michl et al., 2012; Rohrbeck et al.,

2009, 2007). I agree with the perception that especially theoretical and conceptual work is

needed to understand the spin-along approach better. Especially, due to the fact that it is ap-

plied by different firms such as Cisco (Salona et al., 2000), Philips (Michl et al., 2012) as well

as Deutsche Telekom (Mahdjour and Fischer, 2014, 2013; Michl et al., 2012).

As of today non-financial effects of corporate venturing, as for example strategic ben-

efits, are under-investigated in scientific literature (Narayanan et al., 2009). As a matter of

fact Ireland et al. (2001) claim that corporate venturing contributes to the corporate strategy of

a firm, by building up new capabilities and businesses leading to renewal of the firm, foster-

ing of strategic change and enhancements in profit margins and growth (Narayanan et al.,

2009; Zahra and Hayton, 2008). Especially in high technology industries, corporate venturing

is an important component of corporate strategy (Narayanan et al., 2009).

The goal of this paper is to conceptualize the spin-along strategy as an alternative way

to master the cycle of adaptation. I agree to scholars who state that corporate venturing (and

by that the spin-along approach, too) is an important element of corporate strategy (Carrier,

1996; Hitt et al., 2001; Narayanan et al., 2009).

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OVERVIEW OF SPIN-ALONG LITERATURE

Rohrbeck et al. (2007) introduced the spin-along approach first, after building on ob-

servations from Cisco (Salona et al., 2000) and Deutsche Telekom. They claimed that mana-

gerial literature misses an integrated perspective of spin-in and spin-out venturing activities.

Subsequently other scholars built on their general idea and enriched the concept (Klarner et

al., 2013; Mahdjour and Fischer, 2014, 2013; Michl et al., 2012; Rohrbeck et al., 2009). The

following paragraphs will give a brief overview about this research field.

In their two contributions Rohrbeck et al. (2009, 2007) argue that spin-out activities

have two goals: first, commercialize R&D results that could not be transferred to an internal

business unit and second, externalize business that is no longer part of a firm’s core business,

and where it is expected that the costs of running these activities can be reduced and business

with competitors is possible. In contrast spin-in activities aim to (completely or partly) inter-

nalize external organizational entities to acquire their technological and market know how

(Maula et al., 2005).

The spin-along approach is defined as a combination of spin-in and spin-out activities

(and in a greater sense a combination of internal and external corporate venturing). It enables

firms to find “alternative paths for radical and non-core innovations” and promote business

model innovation; innovate “in areas with little synergy with existing business” and innovate

„closer to the market” (Rohrbeck et al., 2009, p. 48).

Originally, the spin-along approach was framed from the viewpoint of an R&D unit.

Therefore the early understanding of the concept focused on the commercialization of R&D

results with the help of spin-out companies outside the parental firm. Key of this understand-

9

ing is the maintenance of a certain linkage between parent and venture to keep the door open

to re-integrate the spin-along venture later on (Rohrbeck et al., 2009).

Michl et al. (2012) applied the spin-along approach to the concept of ambidexterity.

The authors analysed four cases and defined the spin-along approach as a process, which ena-

bles exploitation and exploration capabilities of an ambidextrous organizations. The linkage

between ambidexterity and corporate venturing has previously been emphasized by Williams

& Lee (2009), who called ambidexterity “the learning perspective” of corporate venturing.

Klarner et al. (2013) understand the spin-along approach as a measure to attract, retain

and nurture high-performing entrepreneurial-oriented employees. Companies that apply the

spin-along approach offer their employees an opportunity to realize own ideas. At the same

time these very employees are in a situation with both high flexibility and high security

(“flexicurity”).

Furthermore, Mahdjour & Fischer (2013) linked the spin-along approach with interna-

tional entrepreneurship theory. They revealed that even spin-along ventures can face too high

internal barriers, although the basic idea was to build them to be free from barriers. To over-

come even those barriers, internationalization into markets where the parental company has

only a little or no footprint at all, was proposed as a mitigating strategy. As a result Mahdjour

& Fischer (2013) “suggest that if corporates do not accept that their new ventures cannibalize

own business models, engage in business with competitors or may require key parental assets,

early internationalization can be an attractive new direction when spinning-out new ventures

successfully” (p. 2).

Moreover, in their case study of 10 spin-along ventures of Telekom Innovation Labor-

atories (T-Labs), Mahdjour & Fischer (2014) identified capabilities and “good practice”

measures, necessary to implement the spin-along approach with the help of a dedicated spin-

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along program. They suggest, that “the successful implementation of a spin-along program at

T-Labs required a corporate environment which encouraged entrepreneurial activity, a spin-

along program that generated, managed and guided spin-alongs, and new ventures that were

developed with a customer and business orientation and with sufficient access to parental as-

sets” (p. 7). Out of a set of 13 core capabilities and 43 “good practice” measures, Mahdjour &

Fischer (2014) specifically highlighted the following capabilities: first, management of inter-

nal conflicts of interest. In the T-Labs case this conflict management capability is related to

the fact that spin-along ventures challenge established processes of the parental firm and or-

ganizational sub-units. Secondly, the access to parental assets and shared services is an im-

portant capability of a spin-along program management.

As I will point out later the degree of distance between a spin-along venture and its pa-

rental unit, which Mahdjour and Fischer (2014) refer to as “post-launch-relationship”, is an

important aspect and can be altered by granting or refusing access to parental services or as-

sets.

TOWARDS THE SPIN-ALONG STRATEGY FOR ORGANIZATIONAL

ADAPTATION

The previous section gave an overview of past research on the spin-along approach.

Since I deducted the spin-along approach to be a measure for organizational adaptation

(which itself is a metaphor for strategic management that influences corporate entrepreneur-

ship, which embodies corporate venturing), I will now shortly introduce the adaptive cycle of

Miles et al. (1978) and describe their four strategic organizational types in order to propose

the spin-along strategy as an alternative.

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The Cycle of Adaptation

As pointed out by Drejer (2002) and in line with the prior given introduction of popu-

lation ecology, the adaptive cycle (Miles et al., 1978) builds on three assumptions: First “or-

ganizations can act to create (or choose) their environment”; second “management’s strategic

choices shape the organization’s structure and processes”; and third “once chosen, structure

and process constraints strategy” (Drejer, 2002, p. 87). Furthermore a company’s top man-

agement needs to decide on balancing modes to adapt to environmental changes and its deci-

sions how to adapt refer to the “product-market domain, production and distribution technol-

ogies, and administrative structure and processes” (Drejer, 2002, p. 87) .

The adaptive cycle consists of three problems that every company faces: the entrepre-

neurial problem, the engineering problem and the administrative problem. Although these

problems do not occur subsequently, but instead rather simultaneously, for the matter of com-

prehensiveness, the three aspects are described consecutively in the following.

Entrepreneurial Problem

The first phase of the adaptive cycle, the entrepreneurial problem, is inherent in all or-

ganizations, but most visible in smaller and fast growing firms, or firms that face a radical

change because they need to overcome a major crisis. Especially in new organization, the first

challenge is to claim the organizational domain. This domain is characterized by the good or

service a company intends to offer to a specific target market or market segment. The trigger

for this is the so called “entrepreneurial insight”, which is naturally at the beginning only

roughly defined and linked with a high degree of uncertainty. To solve the entrepreneurial

problem, a firm’s management needs to identify the specific organizational domain (product-

market combination) and decide to invest resources to conquer this domain. After this deci-

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sion phase, objectives are formulated to aim for the new domain and to (re-)develop the or-

ganizational shape (internally and externally). In mature firms, this very issue is just one part

of the entrepreneurial problem. Here an additional challenge is present: due to the fact that

mature firms already have solutions to the engineering and administrative problem the recog-

nition of entrepreneurial insights and a subsequent reaction to that is harder. This structural

inertia increases with age and size of a firm. Established firms tend to focus more on efficien-

cy enhancements rather than on doing new things. Miles et al. (1978) claim, that although the

solution of the entrepreneurial problem stays a top-management challenge, new opportunities

have to be recognized by lower management levels (Bower, 1970).

Engineering Problem

After organizations have selected a new organizational domain, decided to put re-

sources into it and started to re-shape the own firm, the need arises to create a system, which

“operationalizes management’s solution to the entrepreneurial problem” (Miles et al., 1978, p.

549). This issue of operationalization via the creation of a system is called the “Engineering

Problem”. The engineering problem is constituted by the top management’s need to have a

system in place that produces and distributes the earlier defined new products and services.

The system also enables the linkage of new information, communication and control. Miles et

al. (1978) argue that the system, which is created to solve the engineering problem, can

change over time, while the administrative problem is tackled.

Administrative Problem

The administrative problem describes the need for organizations to reduce uncertainty

of the new entrepreneurial domain and to optimize the administrative system, which has been

shaped during the engineering phase. Miles et al. (1978) argue that it is about “rationalizing

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and stabilizing those activities which successfully solved problems faced by the organization

during the entrepreneurial and engineering phases” (p. 549). They put stronger emphasis on

the fact that the administrative problem is not just about rationalizing the system which has

already been developed to reduce uncertainty. More specifically they argue that management

needs to transform the organizational processes in a way that the firm can continue to evolve

and stay innovative over time. According to Miles et al. (1978) this resolution to the adminis-

trative problem is vital for the whole cycle of adaptation.

Due to this pivotal character of the administrative problem, the emphasis lies on ra-

tionalization and articulation of this very concept: An organization should aim for an adminis-

trative system (processes and organizational structure of the firm), which helps to efficiently

direct and monitor current activities while also being flexible enough to manage future (inno-

vative) activities. This duality of the administrative system is characterized as lagging and

leading variable in the adaptation cycle. The lagging variable thereby describes the aim for

appropriate structures and processes to achieve the prior composed strategic goals. At the

same time the leading variable is the other side of an administrative system that enables the

organization to adapt to new entrepreneurial triggers. All in all the administrative system

needs to have the capacity to flexibly support a firm’s management to manoeuvre through

new organizational paths.

Four Strategic Types of Adaptation

In the following I will very briefly highlight the four strategic types, which are pro-

posed by Miles et al. (1978) in order to argue for the spin-along strategy as an alternative

(“hybrid”) method, which incorporates aspects of the four strategic types.

Firstly, a “Defender” is described as an organization, which has control over a rather

narrow product portfolio in a small market, where the firm has a strong position. This narrow

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market domain and the strong position requires only little adjustments of their technology,

structure and methods (Drejer, 2002). The Defender primarily aims for improving efficiency

of ongoing operations.

Secondly, a “Prospector” is an organization, which engages in a pro-active process of

scanning the environment for new business opportunities. The intention is to try out new

things to respond to emerging opportunities. Furthermore, Prospectors have the ability to set

trends and create uncertainty in a market, which forces competitors to react upon their pro-

active behaviour. With this in mind it becomes clear, that efficiency is not the focus of a Pro-

spector. Moreover Prospectors are keen to take risks and to encourage their employees to do

risky things without needing to fear punishment. As Miller and Friesen (1978) pointed out

these companies can be found in rather competitive environments (Drejer, 2002).

Thirdly, “Analysers” are positioned between Defenders and Prospectors. Analysers

can concentrate on both, stable ongoing business and changing operations. They tend to im-

prove efficiency in their stable business domain with well-defined processes and structures.

For the more changing business domain, Analysers carefully observe competitors and adapt to

their behaviour efficiently. As a matter of fact they enter new business domains, only if they

are close to their core business. The challenge for these firms’ top-management is to manage

both: exploitation and exploration aspects. Today this challenge is researched under the

broader umbrella of organizational ambidexterity (O’Reilly and Tushman, 2008).

The last strategic type (“Reactors”) reflects organizations that fail to adapt to envi-

ronmental changes at all. They lack an efficient strategy-structure relationship and avoid

changes in their organizations until the environment forces them to do so. In the long run

these companies need to either become one of the other strategic types, or they will not sur-

vive (Drejer, 2002; Miles et al., 1978).

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A NEW STRATEGY FOR ORGANIZATIONAL ADAPTATION: THE SPIN-ALONG

STRATEGY

I acknowledge the strategic typology of Miles et al. (1978) by linking their ground

work with an emerging concept of corporate venturing: the spin-along approach. My goal is

to show that the basic idea of spinning out new ventures to assess a later reintegration (and the

other way around) can be understood as a strategic intent to solve the three problems of or-

ganizational adaptation. My analysis does not attempt to replace any of the typologies of

Miles et al. (1978). Instead my contribution should be understood as an alternative strategic

manoeuver. After my reasoning I will give a definition of the spin-along strategy and position

it as a hybrid method to master organizational adaptation.

----------------------------- Insert Table 1 about here -----------------------------

The Spin-Along Approach and the Entrepreneurial Problem

As previously stated, established companies face the challenge to change their existing

solutions to the engineering and administrative problem. The spin-along approach tries to

overcome this inertia (respectively the incumbent's curse) therefore it addresses the part of the

entrepreneurial problem, which especially established organizations face. To solve the issue

of re-shaping the product-market domain, the spin-along approach helps incumbents to react

to the entrepreneurial trigger in a lean a way. As pointed out by Miles et al. (1978) managers

need to decide which domain to put resources in. However, the spin-along approach helps to

spread the risk by engaging in more than one domain at once. As shown by Mahdjour &

Fischer (2014) a company may spread risks and react to more than one entrepreneurial insight

at once by spinning-along more than one venture at once. By spinning-out new ventures an

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organization's management can experiment in which new organizational domain it should

engage itself the future. It can spread risks with the help of different parallel "speed boats"

(Mahdjour and Fischer, 2014) instead of manoeuvring the whole company into an uncertain

direction.

Moreover the linkage between a parental organization and its ventures ensures a flow

of information and shared market insights. Parents learn from their ventures and the other way

around. Therefore the spin-along approach helps organizations to re-shape themselves. Also,

the lower employee level (e.g. the spin-along venture's management) is put in the position to

grasp new business opportunities and become the moderator between the parental firm and

new emerging entrepreneurial insights and opportunities.

The Spin-Along Approach and the Engineering Problem

The next phase starts with an organization, which decided to spin-out new ventures

and keep them at distance over time (spinning them along). To operationalize "management’s

solution to the entrepreneurial problem” (Miles et al., 1978, p. 549) the parental firm has to

engineer a system, which is able to manage a pool of spin-along ventures (as proposed by

Mahdjour & Fischer (2014)) and ensures an efficient bi-directional transfer of knowledge and

assets. Furthermore, in line with Miles et al. (1978) the system needs to be flexible to react to

both modes of spinning out and spinning in ventures, which reside in a spin-along pool. The

system must give management guidance to assess the strategic direction of the spin-along

pool and the degree of distance of each venture towards the parent. This fits the ambition of a

system emphasized earlier; which enables the linkage of new information, communication

and control (Miles et al., 1978).

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The Spin-Along Approach and the Administrative Problem

After solving the entrepreneurial and engineering problem, companies need to reduce

uncertainty of the new entrepreneurial domain. They need to overcome problems, which oc-

curred while the entrepreneurial insight has been tackled. Furthermore the need exists to

transform the organization toward the new market domain. The spin-along approach changes

the organizational structure already, when a company starts to do venturing by for example

initializing a spin-along program.

Furthermore the administrative system needs to ensure that not just the inside out per-

spective (the stage where an entrepreneurial opportunity is investigated with the help of spin-

ning out new ventures), but also the outside-in perspective (where it is about decreasing the

distance towards the parent or to (re-)integrate a spin-along venture). I claim that the duality

of spinning-out and spinning-in can be compared to the duality of the lagging and leading

variable of the administrative problem. As I argued previously, lagging and leading can be

referred to organizational ambidexterity, which other scholars showed to be achievable with

the spin-along approach (Michl et al., 2012).

The lagging variable of the spin-along approach is reflected by a spin-along program,

which embodies spin-along capabilities (Mahdjour and Fischer, 2014), aims for efficiency

(e.g. by a cross-venture synergy assessment), seeks for good ideas as input factors, and en-

sures proper knowledge and technology transfer between venture and parent. As a matter of

fact this program (understood as administrative system) needs to manage the distance between

a parental organization and its spin-along ventures. Since spin-along ventures pass through

the cycle of adaptation themselves, both systems of administration (of parent and spin-along

venture) need to be compatible with each other.

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The leading variable of the spin-along approach, as a solution to the administrative

problem, is reflected by the ability to constantly re-configure the capability set of the spin-

along program. Furthermore it reflects the ability to constantly spot new opportunities (e.g.

emerging technologies and companies) that affect ventures residing in the spin-along pool.

Furthermore a market oriented R&D that is achieved with means of technological foresight

within the parental organisation can acknowledge the leading variable.

Reflection on the Original Strategic Types

After having emphasized the spin-along approach as a strategic measure to solve prob-

lems of organizational adaptation, I will know put the three strategic types Analyser, Defend-

er and Prospector in context to spin-along. I spare the analysis of the Reactor since it is not a

proper strategy to deal with adaptation.

Starting with the Analyser strategy, I claim that it best fits to a company following a

spin-along strategy. As described above a spin-along strategy is a valid measure to concen-

trate on both: increasing efficiency of stable business, when at the same time engaging in new

business opportunities with the help of new ventures. Since the Analyser is considered to be a

combination of a Prospector and Defender, I claim that also in the spin-along process both

strategic types can be found.

One explanation can be the character trait of the Defender to protect its ongoing nar-

row market-domain against competition by making only minor changes, but in the most effi-

cient way. As an example, I envision a company which has an incumbent position in a narrow

market-domain, but at the same time has managed to set up a pool of spin-along ventures,

which engage in market domains which are similar to the parental one. For this example the

spin-along ventures act closely to the Defender’s market domain, but have a significant foot-

19

print in other business as well. In case a Defender is faced with a new competitor, which tends

to have a competitive advantage when offering a different and more advanced feature-set,

then the Defender has the chance to flexibly spin-in one of its spin-along ventures to outper-

form the new competitor. I claim, that a Defender benefits from the spin-in perspective of the

spin-along approach.

In addition the Prospector benefits from the above described spin-along strategy, too.

As said earlier a Prospector takes risk to engage in new market opportunities and aims to

force other market participants to react upon its first mover ambitions. I claim that the charac-

ter trait of the Prospector is emphasized by the spin-out perspective of the spin-along ap-

proach. The vehicles to try out new things and gain first mover advantages towards competi-

tors are spin-out companies that operate in very different and emerging market domains; they

operate under the Prospector’s wings and within its spin-along pool.

DISCUSSION

From Spin-Along Strategy to the “Spin-Along Shell Model”

Based on the reflection on the strategic typology of Miles et al. (1978) I propose the

spin-along strategy as an extended scientific concept, which builds on the spin-along ap-

proach. I claim a spin-along strategy

to be part of an organizations corporate strategy and by that a responsibility of the

top-management (not just of the R&D unit as claimed by Rohrbeck et al. (2009,

2007));

20

to enable an organisation to set up, manage and nurture a pool of spin-along ventures,

which either originate from the parent organization itself (e.g. an internal corporate

venture which is granted more independence as a separate organizational entity) or

which originate from the external market and are brought into the spin-along pool

(e.g. by engaging in joint development of a new product or by sharing certain assets

like patents or machinery); and

to embody a virtual “leach” between a parental organization and an external spin-

along venture and the ability to flexibly change the “distance” over time.

I derived the first aspect of the spin-along strategy to be valid, because the previous

analysis showed that it is an appropriate approach to manage the adaptive cycle. Furthermore

this perception is in line with other scholars that claim the importance of the top-management

to be supportive towards corporate venturing measures in order to facilitate intrapreneurship

(entrepreneurial means of internal employees) and to create new business (Antoncic and

Hisrich, 2001; Narayanan et al., 2009).

The second aspect is based on the idea, that the ability to (re-)integrate a former spin-

out into the own organization should enable a company to tie external ventures, too. Scholars

agree that the knowledge flow between start-up and corporate parent contributes to organiza-

tional learning of both parties (Maula et al., 2003; Narayanan et al., 2009). Further, I believe

that a staged process of decreasing the distance between a venture and another organization

though a spin-along pool offers better opportunity to internalize knowledge and capabilities of

external units.

21

The third part of the spin-along strategy is the ability to change distance between a

venture and a parental firm. To explain this “distance” I propose the “Spin-Along Shell Mod-

el”, which I will now explain briefly.

The focal point of the “Spin-Along Shell Model” is a single organization. However I

claim that around a focal company, there are not just competitors, but also firms, which have

a certain relationship with the focal company. This very relationship can be strong or weak;

however, one measure to describe it in the sense of a spin-along strategy is to describe the

degree of distance. As reflected in Figure 1 the degree of distance can be assessed by a four-

tier model.

The first tier is the organization itself, which manages a certain product/service portfo-

lio and could also be structured via different business units. However, every process and

structure in this first tier is the core of the focal organization; as such no venturing-related

issues materialise here.

The second tier reflects the internal corporate venturing sphere. As said earlier internal

corporate ventures are internal organizational units that reside within the organizational

boundaries, but have more independence from the core business processes and structure. An

example could be a temporarily formed (rather independent) team or project, which investi-

gates a new product or process innovation for the focal firm.

The third tier is the starting point for what I claim to be the spin-along sphere. Internal

corporate ventures are externalized into semi-autonomous organizational entities. These spin-

outs are understood as spin-along ventures when they are intentionally externalized to inte-

grate them or to completely spin them off at a later point in time. I claim that these spin-along

ventures can be differentiated according to their level of distance. I distinguish two sub-

22

groups here. First, “close spin-along ventures” (3a) are independent organizational entities,

that the parent organisation has a majority stake in. Its stake can exemplary be measured by

the amount of shares, number of parental employees, relevance of parentally owned assets

(like patens or machinery) for the ongoing operation, but also the dependence on the access to

the parent’s business network, sales channels or benefits derived from the parent brand power.

In this first sub-category, the spin-along ventures’ competitiveness strongly depends on the

corporate parent’s willingness to grant access to these factors.

------------------------------- Insert Figure 1 about here -------------------------------

The second sub-group reflects “distant spin-alongs” (3b). The just mentioned factors

do not play a major role in the performance of the spin-along ventures, but are still present.

An example could be that these ventures have other majority stakeholders or rely more

strongly on own patents and sales channels, which they developed and control on their own.

The stake of the parental organization in the spin-along venture is not crucial for the spin-

along venture’s survival.

The fourth tier of the spin-along shell model reflects the external market. This includes

competitors, former spin-offs as well as future spin-along ventures. Taking into account that

firms in this tier have a shell sphere around them as well makes clear, that focal companies

can share the same ventures around them (e.g. when two companies hold shares of a spin-

along venture or form a joint-venture “to develop and/or commercialize new technologies or

build various organizational skills such as R&D, marketing or production” (Narayanan et al.,

2009, p. 59)).

23

CONCLUSION

Academic and Practical Implication

My conceptual work aimed to contribute to the emerging discussion around the spin-

along approach as a relevant scientific concept. Furthermore I addressed research gaps and

conceptualized the spin-along strategy as an extended attempt. My argumentation was by de-

sign theory-oriented, which I claim to be necessary for a more conceptual and not empirical

driven scientific contribution. I am open for other scholars to challenge my ideas around the

spin-along strategy and the “Spin-Along Shell Model”. I encourage more scholars to engage

in the discussion of what both contributions are in more detail, in which companies they are

applied, and what the mechanisms in comparison to other venturing methods are. Further I

believe that the logic behind spin-along can be a valid measure to combine selection and ad-

aptation viewpoints of population ecology scholars. Moreover, I claim especially the “Spin-

Along Shell Model” to be a practical tool for Management practitioners. It may serve as an

alternative tool to position one’s own spin-along venture portfolio, towards other external

companies. In the upcoming paragraph I will draft future research directions, which concen-

trate on theories relevant for spin-along research.

Future Research Directions

Future research should answer the question how to decide when a movement from one

shell to another is appropriate, meaning when the change of distance between a venture and

its parental organization is promising. Exemplary theories to decide for either expanding or

shorting distance are “transaction cost economics”, “organizational relatedness”, “the resource

based view” as well as “organizational learning”.

24

I claim the spin-along strategy to be a “smoother” way of internalizing external

knowledge (embodied in external organizational units) compared to a sudden acquisition of

an entirely external firm. A staged process slowly increases the degree of relatedness between

a corporate venture and parental organization, which positively influences the parent’s gains

(Sorrentino and Williams, 1995; Thornhill and Amit, 2001). Relatedness describes “the extent

to which existing capabilities can be used for performing a new activity” (Gulbrandsen et al.,

2009, p. 91). As argued before (when talking about “close spin-alongs” and “distant spin-

alongs”), dimension to assess the relatedness are for instance marketing activities, human re-

sources and physical equipment (Narayanan et al., 2009; Sorrentino and Williams, 1995). I

claim that the longer a company stays in a spin-along pool/in a specific spin-along-shell of a

focal firm, the more the relatedness between the two increases.

Moreover I claim the “Spin-Along Shell Model” to decrease transaction costs of (re-

)integrating external ventures, whether they have been internal or not in the past. Transaction

costs are the costs “for search, negotiating, bargaining, contracting and contract management”

(Gulbrandsen et al., 2009, p. 90). In a short-term oriented strategy lower transaction costs

may result when skipping shell phases by integrating an external venture instantly, but in a

long-term (strategic) perspective the expected benefits will certainly be lower, because the

integration of the business could not mature over time. Since firms do not materialize all their

knowledge explicitly I agree to Gulbrandsen et al. (2009), who said that tacit knowledge

makes it harder for a parental (or “buying”) company to learn how to perform an action the

venture did in the past.

Additional future research directions shall take the resource based view into account.

The resource based view helps to explain performance differences between companies within

the same industry (Barney, 1991; Penrose, 1959). In the corporate venturing context, the re-

25

source based view helps to explain how the resource base of a corporate parent and a corpo-

rate venture influence their relationship (Narayanan et al., 2009). As part of the resource

based view absorptive capacity between ventures and parents play a role in shell-to-shell

movements. Absorptive capacity describes the ability to internalize external knowledge (Co-

hen & Levinthal, 1990). Moreover Keil et al. (2008) understand internal corporate ventures as

capability building agents that share these capabilities with the parental firm. In a spin-along

setting these internal venture can move outside of the parental unit, but at the same time stay

“leached” by the parent (kept at distance). Following this idea, I claim that the similarity of

factors like competences and tacit knowledge will spill-over in a bi-directional manner: Spill-

overs from corporate parent into the pool of ventures, spill-overs from the ventures back to

the parent, but also spill-overs from ventures to other ventures that reside in the spin-along

pool. These spill-over effects in the context of spin-along should be investigated further.

This need relates especially to the broader research field of organizational learning. It

is an established notion that while conducting corporate venturing over time a corporate ac-

cumulates knowledge to optimize their venturing program – the company learns (Maula et al.,

2003). Narayanan et al. (2009) even argue that “one of the critical distinctions between [cor-

porate venturing] as a program vs. being a set of transactions is the role of learning” (p. 71).

However, organizational learning in this outside-in and inside-out movement is still under-

researched (Narayanan et al., 2009). I derive from that a clear need to conceptualize the learn-

ing perspective of the spin-along strategy further.

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TABLE 1

Addressing the three problems of the adaptive cycle with the spin-along strategy

Entrepreneurial

Problem

Explore a new product-market domain: Spread the risk of exploiting new entrepreneurial insights via various

spin-along ventures (“speed boats”) that facilitate organizational change through learning mechanisms towards the parental organization

Disperse the identification of new entrepreneurial insights via the spin-along ventures’ teams

Engineering

Problem

Provide a system for new domains: Define a flexible spin-along pool, which enables spinning-in and spin-

ning-out activities

Administrative

Problem

Reduce uncertainty of the system that was set up for new domains: Implement proper management capabilities to guide the strategic direc-

tion of the spin-along pool (e.g. by a market driven R&D and techno-logical foresight)

Regularly adjust distance between parent and spin-along ventures to account for the lagging variable of the administrative system and con-centrate on efficiency

Ensure regular flow of new input factors to nurture the spin-along pool and account for the leading variable of the administrative system

Ensure compatibility of administrative systems between parent and its ventures

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FIGURE 1

Spin-Along Shell Model